Seed Enterprise Investment Scheme
Legislation has been introduced to provide for a new tax advantaged venture capital scheme, similar to the Enterprise Investment Scheme (EIS).
The new scheme - the Seed Enterprise Investment Scheme (SEIS) – is focused on smaller, early stage companies carrying on, or preparing to carry on, a new business in a qualifying trade. The scheme will make available tax relief to investors who subscribe for shares and have a stake of less than 30% in the company.
The relief applies to shares issued on or after 6 April 2012.
The SEIS:
- applies to smaller companies, those with 25 or fewer employees and assets of up to £200,000, which are carrying on or preparing to carry on a new business;
- gives income tax relief worth 50% of the amount invested to individual investors with a stake of less than 30% in such companies, including directors who invest in their companies;
- applies to subscriptions for shares, using the same definition of eligible shares as EIS;
- applies to an annual amount of investment of £100,000 per investor, with unused annual amounts able to be carried back to the previous year, as under EIS;
- provides for relief within an overall tax favoured investment limit of £150,000 for the company. To give the greatest degree of flexibility, this will be a cumulative limit, not an annual limit;
- provides for an exemption from capital gains tax (CGT) on gains on shares within the scope of the SEIS.
Capital Gains Tax holiday
The CGT holiday is being extended - gains realised on the disposal of assets in 2013-14 that are invested through SEIS in the same year or following year will be exempt from CGT. However, the extension of the relief is for only half of the qualifying reinvested amount.
There is a further change. From 6 April 2013 the ‘independence’ condition has been amended to ensure that companies established by corporate formation agents will not inadvertently be disqualified from taking advantage of the scheme.